One possible way to exit the ‘blinking game’- staring down neighbors until one of you blinks and give up high cash rent farms, is to propose a flexible cash lease to your landowners. You would have a base lease that is below the current cash lease, but where the landowner gets a bonus if revenue is higher than current predictions.
There are many ways to set up flexible leases. There is no right or wrong formula. You and your landowner can decide which terms to use, and how you want to determine average price and yield in any one year.
|BETTER RENT IDEA? Flexible cash-rent may be an alternative to conventional cash rent in some situations.|
See the following links for publications and a spreadsheet on flex leases. By visiting these sites you should get a good idea of how you could build a flexible lease that might benefit both parties. Given the current low prices, it could help you buy time and cut out some red ink right now. The landowner will benefit if and when crop prices return to higher levels.
Iowa State University - Flexible Farm Lease Agreements
Iowa State University - Flexible Cash Rent Lease Examples
Iowa State University - Flexible Lease Agreement Worksheet - (Requires Excel)
North Central Farm Management Extension Committee - Fixed and Flexible Cash Rental Arrangements for Your Farm
You may also find it useful to check out various crop budgets prepared by various Land Grant universities for 2016. These may be helpful in helping you figure out how much straight cash rent you can pay, or how much you are willing to pay, knowing you might have a loss this year. Budgets are also useful if you do decide to try a flexible cash lease. They can help you select a reasonable starting point for a base rent, and give you something to show your landowners as well.
Check out these sites.
The first one provides crop budgeting information from the Center for Commercial Agriculture at Purdue University.
Here is crop budgeting information from the University of Illinois.
Check out these budgets prepared at Iowa State University
Finally, check out budgets from the University of Kentucky.
- Greg Halich is an Associate Extension Professor in Farm Management Economics for both grain and cattle production. He also raises corn and soybeans in southern Woodford County. He can be reached at Greg.Halich@uky.edu or 859-257-8841.